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NEW YORK, July 30 (Reuters) - A federal judge rejected
JPMorgan Chase & Co's bid to dismiss a lawsuit accusing
it of misleading thousands of cash-strapped homeowners
nationwide about modifying their mortgages.

U.S. District Judge Richard Stearns in Boston on Friday let
homeowners pursue claims that the largest U.S. bank
systematically failed to keep its end of the bargain after
signing up borrowers hoping to modify their mortgages under the
federal Home Affordable Modification Program, or HAMP.

Stearns also let stand claims that Morgan's Chase unit drove
homeowners deeper into debt by prolonging the modification
process through "gross ineptitude," sometimes adding fees to
loans already in default and starting foreclosures while
modifications were being negotiated.

"(Some plaintiffs) allege that they would have fared better
economically had their homes been foreclosed by Chase at the
outset instead of at the end of a drawn-out and ultimately
futile modification process that Chase had no real intention of
honoring," Stearns wrote. "These are, of course, allegations --
but for present purposes, the court must credit them."

JPMorgan Chase spokeswoman Amy Bonitatibus said the bank
does not discuss pending litigation and strives to comply with
HAMP guidelines. Lynn Sarko, a lawyer for the plaintiffs, said
he is pleased with the decision and expects to pursue the case
"swiftly."

The lawsuit combines 16 complaints that had been filed
across the country. Bank of America Corp and Citigroup
Inc face similar multidistrict litigation over HAMP, court
records show.

Chase and those banks are among mortgage servicers that
joined a $25 billion foreclosure abuse settlement announced by
federal and state officials in February.

The government set up HAMP in 2009 to help struggling
homeowners by encouraging servicers to ease loan terms in
exchange for incentives.

HAMP was intended to help 3 million to 4 million homeowners,
but the number awarded permanent modifications totaled just 1.03
million in May, Treasury Department data show.

Critics have also called the program confusing. Stearns
cited examples from the complaint in which Chase justified some
fees with "gibberish" such as "G Speedpay Fee, Corp., Advance
Adjustment, Late Charge, Misc. F/C and B/R Expenses, Misc.
Corporate Disbursement, and Property Preservation."